Airbnb-style rentals are extremely popular, but they are not to be considered a long-term real estate investment opportunity. For short-term rental landlords, it’s a fairly lucrative deal. The rents for these properties are often high with beautiful destinations, which lure many novice investors.

However, it’s not for people who want a long-term investment strategy. There are six other reasons why Airbnb investors tend to have problems.

Short-Term Rentals Ride The Tourism Industry’s Coattails

For Airbnb investors to succeed with their rental units, the tourism industry needs to be riding high. This industry is subjected to the whims of the market, and everything can be smooth sailing for a short time and then suddenly go up in smoke – natural disaster, terrorism, etc. The demand for these kinds of houses can drop fast – and you’re left holding the back.

Short-Term Rental Produce Artificial High Rates

These rentals tend to be priced higher than yearly rental rates, which means they’re not ideal for the local workers. This will lead to two problems:

•  It forces those local folks out of these homes – law enforcement, teachers, entrepreneurs, etc. They cannot afford to live in these homes. And, this can have a negative impact on the area.
• The rental rates often lead to buyers and sellers trading the properties, causing the temporarily inflated incomes. When it dries up or is no longer coming in, landlords experience a negative cash flow, as the asset is way too high for people to afford.

Short-Term Rentals Raises Competition Against Landlords

Since anybody can be a landlord, it means there are a plethora of landlords. This equates to a lot of competition. When things are tough, it’s the one who charges the least that will win the race.

Short-Term Rental Gain Are Balanced Out By The High Fees

High rents on shorter-term rentals tend to be balanced out by the high management fees. HomeAway, Airbnb and VRBO charge fees – sometimes as higher as 30 percent.

Short-Term Rentals Fail To Support Dependable Tenants

Smart investors want long-term, dependable tenants. Long-term tenants mean investors save themselves money on cleanup, marketing, screening, etc. If you rent to someone for one week or two at a time, they have no reason to take care of your property, which can lead to higher repair and cleanup costs.

Short-Term Rentals Doesn’t Offer Constant Cash Flow

It’s not uncommon for a unit to be booked up to 18 months in advance, especially in popular vacation destinations. But, landlords can have a hard time keeping them all straight. Some tenants will stay several days with others staying weeks or months. Can you stay profitable if you have 40 percent occupancy for the whole year?

What To Keep In Mind

These types of rental units can be quite lucrative. If you have a rental home in your preferred vacation spot and only spend three months out of the year for it, why not rent it out for others to enjoy when you’re not? These homes can generate passive income with good returns, but you should also be aware of the dangers that can come with them.